LIVE MARKETS War in Europe

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WAR IN EUROPE (0804 GMT)

That’s it. Putin invaded Ukraine read more .

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Markets are showing all the predictable reactions, selling stocks and buying safe havens. Treasury yields are down 10 basis points, while the Swiss franc and Japanese yen are up, as is the dollar index. Gold jumped 2% and oil jumped over $100 a barrel.

What next? Economic recession? Central banks forced to stay on their toes with interest rate hikes? Market bets on a 50 basis point Federal Reserve rate hike for March are fading and at least one ECB policymaker has already urged the bank to stick with its stimulus program until the end of the month. year at least.

The obvious question that arises from the oil price effect is to what extent does it make inflation worse. And if, in this situation, bonds will really prove to be the best safe havens. Watch these central banks.

It will also test the idea that geopolitics is a buying opportunity. Will this hold true even as the situation is described as the worst since the Cuban Missile Crisis?

In the meantime, anyone who dismisses Western sanctions as ineffective should take a look at Russian asset prices. A country with a $640 billion war budget and debt ratios of around 20% now has a 5 percentage point yield premium on its dollar bonds over US Treasuries.

This is more than what is required of countries like Iraq and Bolivia.

But it’s less about the sanctions that have been announced than about those that could now rain down, including cutting off Moscow from international payment systems and banning the holding of one of its bonds. A sell-off of Russian assets accelerated and the ruble fell more than 7% against the dollar.

Of course, all of this will inflict pain on those who sanction too, especially in Europe where the euro has slipped to a one-month low. And don’t forget the country under attack, Ukraine, whose dollar bonds now value a default.

Russian bonds

Key developments that should further guide markets on Thursday:

-The EU will launch new sanctions against Russia Read more

– South Korea’s central bank kept interest rates stable Read more

– Isabel Schnabel, Member of the Executive Board of the ECB, takes the floor

-Raphael Bostic, President of the Atlanta Fed

-Second estimate of fourth-quarter US GDP/new home sales

-Sale of American 7-year banknotes

– American results: Newmont, Papa John’s, Occidental

(Sujata Rao)

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WORST CASE SCENARIO FOR UKRAINE COMES REALIZE, EUROPE DOWN (0709 GMT)

European stock futures fell sharply this morning an hour before the cash market opened after Russian forces fired missiles at several cities in Ukraine and landed troops on its shores, causing a large wave of risk in global markets.

Fears that a war could boost inflation and derail the economic recovery rattled investors, sending contracts on Germany’s DAX index down more than 5% while EuroSTOXX futures fell 5% and FTSE futures fell 2.8%.

Even though Europe is seen as particularly vulnerable due to its heavy reliance on Russian energy imports, the anxiety has spread to other regional markets with Asian stocks also down sharply and US index futures indicating losses of about 2% later on Wall Street.

Oil prices are up more than 5% and gold is up 2%.

(Danilo Masoni)

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